The Bull/Bear Ratio: Definition, Application, and Insights

The bull/bear ratio, often referred to as the bull-bear spread, is a pivotal market-sentiment indicator utilized by investors to gauge the prevailing sentiment among professional financial advisors regarding the stock market. Investors Intelligence, a prominent financial data provider, publishes this ratio weekly, offering insights into the sentiments of market professionals—whether they are optimistic (bullish), pessimistic (bearish), or neutral in their outlook.

Market sentiment encapsulates the collective mood or attitude of investors toward a specific security or financial market. It manifests through the behavior and price movements of traded securities, with rising prices indicative of bullish sentiment and falling prices signaling bearish sentiment.

The bull/bear ratio acts as an aggregate measure of sentiment among financial advisors who actively engage with the market on a daily basis. It reflects the informed opinions of professionals regarding the stock market’s future trajectory and influences their recommendations to clients.

Investors Intelligence conducts a weekly survey among investment advisors to assess their bullish, bearish, or neutral outlook on the stock market. Derived from the ratio of bullish advisors to bearish advisors, the bull/bear ratio provides valuable insights into prevailing market sentiment.

The bull/bear ratio formula is calculated by dividing the number of bullish investment advisors by the number of bearish investment advisors:

\[ \text{Bull/bear ratio} = \frac{\text{bullish investment advisors}}{\text{bearish investment advisors}} \]

Extreme readings on either end of the spectrum (above 60% or below 40%) can serve as contrarian signals, often coinciding with market tops or bottoms.

Investors Intelligence polls investment advisors weekly to compile the bull/bear ratio. As a service providing daily market indicators, Investors Intelligence furnishes traders and investors with valuable insights. The bull/bear ratio, a longstanding indicator, reflects the evolving sentiments of market professionals, such as financial advisors.

Financial advisors’ sentiments can significantly impact their communication with clients and even influence investment advice, thereby affecting market dynamics. Fluctuations in the bull/bear ratio indicate shifts in the proportions of the investment community that hold bullish or bearish sentiments toward the market.

The bull/bear ratio is published weekly by Investors Intelligence, offering regular updates on market sentiment.

While the bull/bear ratio provides valuable insights into market sentiment, it is advisable to use it alongside other indicators and factors when making investment decisions. Relying solely on this ratio may not provide a comprehensive understanding of market dynamics.

While extreme readings in the bull/bear ratio can sometimes coincide with market tops or bottoms, they are not infallible indicators of future market movements. Investors should exercise caution and consider multiple factors when interpreting extreme readings in the ratio.